Tuesday, 16 April 2013

Interest Rates Rise as Banks Intensify Deposit Mobilisation

Lending rates increased slightly in March in response to the need for deposit mobilisation by deposit money banks (DMBs), the Financial Market Dealers Association (FMDA) has said.

The FMDA, which disclosed this in its monthly economic report for March, obtained by THISDAY at the weekend, also attributed the development to a marginal rise in loan administration cost.

The report showed that savings figures averaged 2.0846 per cent; while other tenored funds ranged between 4.2917 per cent - 9.0893 per cent for overnight to 364 days money.

Also, the lending rates, prime structured loan and normal structured loan stood at monthly average of 18.0625 per cent and 22.1876 per cent respectively in March, according to the report.

The rising appetite by banks for deposits has continued to attract criticism from some industry watchers.

Treasury Bills

For treasury bills, the rate of return in the Primary Market Auction (PMA) increased between 30 basis points-46 basis points in the month under review when compared with the average rate of the previous month. This, it said, was in tandem with print and medium term inflationary expectations particularly in the last two auctions conducted in March despite consistent cash inflows from matured Open Market Operations (OMO) bills and fiscal fund disbursements which it said boosted market liquidity immensely.

Meanwhile, in March, the Central Bank of Nigeria (CBN) allotted N387.75 billion against a total of N354.92 billion bills in February 2013.

Subscription in the month dipped by 30.78 per cent to N745 billion relative to N1.076 billion in the previous month.

“At the first, second and third auction in the month under review, 91 days stop rates averaged 10.22 per cent against 9.76 per cent last month; 182 days averaged 10.42 per cent relative to 9.97 per cent in December, while 364 days bills sold in two auctions averaged 10.37 per cent when compared with 10.07 per cent the preceding month.

“Available data revealed that series of OMO auctions session was conducted in the month to mop-up excess liquidity created by maturing bills and FAAC fund release. Hence, the CBN offered N2.018 trillion and sold N1.743 trillion with total sales short falls traceable to some unsuccessful auctions due to low turnout and investors’ desire for worthwhile real rate of return as funds went in chase of investment in other asset classes,” it added.

A quick summation of (PMA and OMO) showed that the month recorded a total of N1.744 trillion (N387.75 billion PMA and N1.356 trillion OMO) against N1.706 trillion in February. It also showed that a net outflow of N130.95 billion was recorded in the month under review, as against the N651.33 billion in the previous month.

FGN Bonds

According to the FMDA monthly review, the regulatory authority in the debt market raised N70 billion from the debt market, compared with the N105 billion borrowed the preceding month. This reflected a marginal decrease by 33.33 percent.

The bonds maturities were re-openings of two previous issues -15.10 per cent FGN April 2017 (5-year original tenor) and the 16.39 per cent FGN January 2022(10-year original tenor).

It added: “Total public subscription in the month for the two bonds amounted to N132.18 billion as against N251.91 billion last month. The successful bids that ranged between 9.5 per cent – 13 per cent for the instruments were allotted at the stop rates of 10.7 per cent and 11.08 per cent for 15.10 per cent FGN April 2017 and 16.39 per cent FGN January 2022 respectively.

“The marginal rates of the re-opened instruments rose slightly by three basis points and 28 basis points respectively over last month’s as a result of lower participation by foreign institutional investors while local players’ interest was not strong enough to move marginal rate southward despite robust liquidity levels at the domestic front.

“A total sum of N70 billion was mobilised in March 2013 as against N105.00Billion in February 2013.”

Nigeria’s Eurobond Yields

Nigeria’s dollar-denominated borrowing costs fell to the lowest in more than nine weeks last week on expectations that central banks globally will provide more stimulus measures to boost their economies. Yields on the nation’s Eurobonds due January 2021 dropped 18 basis points to 4.04 per cent in London, where it is listed last Wednesday as the lowest since January 31, according to data compiled by Bloomberg.

“The market now expects the quantitative easing programnme in the United States to go on for longer and probably for rates to remain low for a more meaningful period,” Emerging- markets strategist at Standard Bank Group, Samir Gadio, had said.

BRACED States

As part of efforts to fast-track and foster economic cooperation and regional integration through collaboration and shared values in the region, the South-south states last week disclosed plans to establish a regional investment fund. The fund is expected to serve as the vehicle to drive the vision of the BRACED Commission. BRACED is an acronym for Bayelsa, Rivers, Akwa Ibom, Cross River, Edo and Delta states and while the commission functions as the coordinating office for the actualisation of the BRACED states mission which is to economic cooperation and regional integration through collaboration and shared values among. Rising from its retreat in Uyo, Akwa Ibom State, stakeholders had recommended the establishment of the investment fund

Lending Rates for MSMEs

The Bankers' Committee last week said it will soon outline new strategies for supporting the real sector, particularly the micro, small and medium enterprises (MSMEs) through the reduction of lending rates. The bankers’ committee expressed optimism that reducing lending rates would reduce social tension by enhancing employment generation in the country. Group Managing Director/Chief Executive Officer, Diamond Bank Plc, Dr. Alex Otti, alongside other bank chief executives said they had extensive discussions on how to make interest rates cheaper for small businesses given that the sector had the capacity of stimulating economic growth. He said modalities on how to achieve lower rate for the sector would be made public within the next few weeks, adding that the issue would be adequately ironed out at its ongoing bankers' committee retreat.

Lower Banknotes

Business owners in Bauchi state last week decried the shortage of lower banknotes for transactions. The business owners lamented that most of their customers no longer patronise them because of the development.

THISDAY checks had revealed that those mostly affected by this development particularly in Bauchi metropolis were petty traders, business centre operators, transporters, among others.

THISDAY investigation at the ever-busy Wunti, Muda Lawal and Central markets had shown that many businesses were battling to make sales due to the shortage of smaller denominations such N10, N20 and N50.

But the CBN Director, Banking Supervision, Mrs. Tokunbo Martins, told journalists in Abuja that the apex bank was aware of the scarcity of lower denominations. Martins explained that the scarcity was caused by the recent setback encountered in the suspended currency restructuring programme of the apex bank.

GDP Rebasing

The National Bureau of Statistics (NBS) indicated last week that the October earlier fixed for the proposed rebasing of Nigeria's Gross Domestic Product (GDP) would not be feasible again as it said it is considering 2014 for the implementation of the policy.

Director General, NBS, Dr. Yemi Kale said that lots of work were yet to be done on the initiative. The rebased GDP figures were initially meant to be released in January 2012, but were shifted to August 2012 following the petrol subsidy strike at the beginning of last year. Thereafter, it was extended to October.

"It is unlikely that even the target of the last quarter (this year) we will make it. I underestimated how much work needs to be done. I think everyone understands that this is very, very crucial and has to be done properly," Kale said when explaining the delay.